wrote in message
news:1173699079.183366.47640@j27g2000cwj.googlegroups.com...
> On Mar 11, 8:58 pm, Lucretia MacEvil < LucyMcE...@BST.com> wrote:
>
> > DCA is a scam started by brokerage firms to get a piece of the average
smuck's
> > paycheck ever week.
>
> More rubbish. DCA works, reasearch it and you'll be enlightened .. if
> you can do basic math.
Does it work on the lottery, Steve?
> DCA wasn't started by brokerage firms. DCA is
> pure math, of which people knew for centuries.
>
The purest math says to only invest when you can reliably forecast
that your investment will increase in the future. The purest math also
says that it is very difficult, if not impossible, to reliably forecast
whether
any particular stock investment will increase in the future.
The purest math also says that any simple trading strategy that
isn't based on a reliable forecast of future investment growth will
only perform as well as it matches the actual pattern of future
price changes. Dollar cost averaging may or may not out-perform
other methods of asset allocation that also are not based on a
reliable forecast of future price changes, such as just investing
a "lump sum" at essentially random times. The relative performance
will always depend on the actual future price changes.
The purest common sense says that most people aren't endowed
with gigantic "lump sums" at the start of their investing lives in the
first place. They only have two choices: invest their meager savings
in the stock market as soon as they are accrued, or continue to
save up until they believe they can forecast a period of relative stock
or stock market out-performance.
The general recommendation and practice of dollar cost averaging
into 401(k) plans and the like is based on the observation that the
broad market indexes have tended to rise over long periods of time.
It is NOT based on any similar observation that any particular individual
stock will do the same, and we can quickly note that many of the
component stocks of the broad market indexes have been removed
from the indexes due to bankruptcy and other catastrophic price
failures.
This implies that dollar cost averaging is a more suitable "pattern
match" for investing in broadly diversified stock portfolios or index
funds/ETFs for the average investor, rather than individual stocks
or a portfolio with a small number of stocks.
---
William Ernest Reid
Post count: 536